Mapping the DNA of a global payroll manager
MAR 01, 2013
Arnold Schwarzenegger made his name pumping iron in a pair of skimpy swimming trunks, earned a fortune in Hollywood and became Governor of the world's eighth largest economy. If he can manage two spectacularly unrelated career transitions, it begs a question for us: do you really need a payroll background to succeed as a global payroll manager?
Over the years I've met numerous international payroll managers in Europe, North America and AsiaPac. Many have dedicated their entire professional careers to payroll, working their way up from junior clerks to manage operations spanning tens, even hundreds of countries and taking responsibility for payments running into multiple millions of pounds.
But others have taken different routes, starting out in ‘back-office' functions such as HR, finance or procurement before taking over a payroll management role. One of the most experienced global payroll professionals I've encountered - with a track record of designing and implementing projects spanning more than 70 countries - actually began his career as an engineer. And while I've not yet run into a payroller who started out as a body builder, I do recall a very pleasant lunch in Singapore with a one-time professional wrestler who subsequently forged a successful career in the international payroll vendor community.
Understanding what makes a successful global payroll manager is a big step towards understanding what makes an international project succeed - and right now, getting that formula right really matters. International payroll is still a relatively new discipline, particularly when you compare it to the long-established UK or US domestic payroll sector, and there are only a limited number of people who can claim to have launched and successfully implemented projects to centralize control of payroll in multiple countries, either regionally or globally. As more companies go down the international payroll route over the coming years, this kind of experience is likely to be in relatively short supply - which is great news if you have it, but bad news if you're looking to recruit it. Many companies will look to promote existing talented employees to international roles - the question is, which department should they look in?
From the national payroll manager's perspective, a long career in domestic payroll management certainly gives you a solid platform for a move into the international arena. You'll have as good an insight as anyone into the ins and out of end-to-end payroll processes and the nuances of payroll's relations with HR and finance. You'll know what it's like to work with different payroll systems and manage outsourcers. You'll have a good feel for what makes a payroll team tick. And you'll know that all of these skills are transferable: whatever country you're working in, payroll is built around the same five core components of preparing data, calculating, making payments, reporting, and dealing with employee queries.
On the other hand, multi-country payroll projects bring challenges that might be unfamiliar to a domestic manager, beginning with change management. All payroll managers deal with day-to-day operational change, of course, driven by legislative change or shifts in corporate plans. But implementing a multi-country payroll strategy involves transformational rather than operational change. You'll know the difference if you've led your function through an M&A or large downsizing exercise, or consolidated different payroll functions into a shared services centre. Transformational change is disruptive, and it impacts multiple aspects of payroll, from IT systems to people and organisational design.
That's why the global payroll manager's role is so diverse - and ultimately so rewarding. It's about understanding how payroll functions that you've never encountered operate today, working out the best way for them to work tomorrow - and then managing the transition from A to B. It's about leading teams with diverse cultures, operating in different legal frameworks. It's about strong project management. It's about working out which multi-country vendor is the best fit for your specific business needs. It's about managing the post-change environment, from putting out fires to developing meaningful performance metrics. It's about dealing with cross-continent time zones. It's about thinking globally. It's about... well, frankly, it's a long list.
The point is, if a guy who started out with a dodgy accent and a pair of Speedos made it to Governor of California, there's no reason why a national payroll manager can't make the transition into an international role. But by the same token, there's nothing to stop a non-payroller with change management expertise and a willingness to learn the fundamentals of payroll from doing exactly the same.
This column was adapted from an article that first appeared in Payroll World
Selecting vendors: why safe isn't always best
JAN 15, 2013
A few years ago I was sitting in a meeting with a European payroll team discussing their international payroll vendor options. For the first 45 minutes, I heard a litany of complaints about their incumbent supplier in the UK - about the rude staff, the poor employee service, the unacceptable error rates, the hidden costs. And for the next 15 minutes, I heard everyone round the table explain why they thought it was a good idea to renew their contract and extend it across Europe.
This puzzling insistence on staying loyal to providers who've failed to deliver is surprisingly common in payroll - and at face value, it's hard to comprehend. If I buy a bottle of wine that tastes like brake fluid, I don't go back and order a 12-bottle case. If I order a minicab and the driver turns up 30 minutes late driving a battered Ford Fiesta that smells like an ashtray, next time I pick a different cab firm. The only times I accept that I don't have any choice are when I deal with cable TV providers and tax authorities - and I see those experiences as God's way of ensuring we understand the concept of misery so we can truly appreciate the finer things in life.
Of course, there are plenty of good reasons why companies prefer not to shift from their incumbent payroll providers, whether domestic or multi-country. You have to go through a vendor sourcing exercise, which can be a time and resource drain. You'll probably need to adapt to a new way of working. You'll have to tackle the multiple risks that come with any change project. And for a period of time during the handover, you're in the uncomfortable position of working with a provider you've just dumped, which is about as much fun as sharing a house with your ex-spouse while the divorce papers go through.
Little wonder, then, that many payroll practitioners prefer to stick with the devil they know.
When it comes to multi-country payroll, however, staying with familiar providers isn't always the best option. If you're just starting out on an international payroll initiative, chances are you're working with a wide variety of national providers around the world today, so some kind of change is inevitable - and the real issue is how wholeheartedly you embrace it. Do you go to your incumbent national providers, see which ones offer international services and send them a Request for Proposal (RFP)? Do you go a step further, do a Google search, see who comes up on the first page and contact them? Or do you carry out more detailed, in-depth research to get a feel for the full extent of your options?
Given the scale of most multi-country payroll initiatives, the third route will probably provide the most comfort to your senior management team - and potentially help you get you the best fit. Many companies start out in international payroll assuming that their choice of provider is going to be dictated by price and geographical coverage - but there's a lot more to it than that. As you dig down into the market, you find a wide range of factors to distinguish between vendors, from the size of employee populations they're comfortable serving, to the quality of the technology platforms they rely on, the robustness of their financials and in some cases, even the vertical markets they specialise in. You also discover that the choice of vendors may be wider than you first expected. Some of the leading providers in multi-country payroll are household names - in as much as payroll gets discussed in your household - but there are a number of reputable companies that do pretty much zero marketing, growing by referrals and word of mouth.
It's worth assessing all the options - even if you ultimately decide that one of your current vendors is the best fit - because the choices you make today will stay with you for years to come. If you think it's hard to shift from a single country provider, imagine what it's like changing a vendor that runs your payroll in ten, twenty or more countries. Do you really want to be sitting round a table in a few years' time listing all the problems you have with your multi-country payroll supplier - before concluding that the only option you have is to stay with the devil you know?
This column was adapted from an article that first appeared in Payroll World www.payrollworld.com
Hybrids, pure-plays and payslip pricing
JUN 01, 2012
The aggregator outsourcing model may be firmly established in multi-country payroll, but vendors are still fine-tuning their approaches - and the strategic decisions they take could have implications for the price of your pay slips.
The nuances of different aggregator models have come up multiple times over the last several months as we've completed the latest update to Webster Buchanan's Multi-country Payroll Review, our in-depth analysis of leading providers. It was also something I discussed recently with Bjorn Reynolds, CEO of Safeguard World International (SGWI), which has been modifying its own service delivery model in Latin America.
SGWI is predominantly a ‘pure-play' aggregator, in that it follows the conventional model of using a network of in-country providers (ICPs) to process payroll on its behalf. In this model, the outsourcer collects gross payroll data and passes it to the ICPs for processing: it then collects the net data from each partner, and provides consolidated reporting and other services to the customer.
This approach differs from the ‘hybrid' aggregator model favored by other outsourcers, which take a two-pronged approach: they process some payrolls on their own systems, and then use an ICP network for the rest. The in-house capability tends to be built in ‘strategic' countries - usually those with large pay slip volumes and the chance to earn a decent margin.
There's good business logic behind both approaches. Using ICPs is a great way for outsourcers to expand their geographical coverage, while passing the onus of staying up-to-date on legislative changes to their partners. Financially, though, it means the fees customers pay have to be shared between two providers - or to put it another way, the customer will be paying a mark-up on the ICP's standard rates. As we've argued before, there's plenty of justification for this mark-up - not least the fact that the aggregator is adding an extra layer of management control to what would otherwise be an untidy collection of standalone country operations.
Processing in-house, by contrast, gives a bigger slice of the proceeds to the outsourcer, which in principle can be reflected in lower prices to the customer. But it also lands the aggregator with all the costs of building and maintaining each country-specific system - and that adds costs back onto the pay slip.
So in practice, the aggregator model is all about finding the right balance between pay slip volumes, country complexity, market pricing, and in-house versus outsourced capabality - not an easy mix to play with.
There's one further twist. One region where SGWI doesn't follow a pure-play model is Latin America, where the high costs of in-country payroll processing have prompted it to set up its own in-house delivery model. It recently teamed up with Adam Technologies, a major LatAm payroll software provider, and is now running Adam's software in its own payroll processing center in Mexico. This isn't a unique idea - other hybrid aggregators use third party payroll software to help them process payroll in-house - but it adds an extra dimension to the delivery equation.
We'll be diving into these nuances in a second upcoming research report focused on the fundamentals of the aggregator model. For now, it's worth keeping two points in mind. Firstly, understanding the economics of your provider's business model will give you better context around their pricing models and a little more insight into their long-term business prognosis. Secondly, the model they adopt is just one part of the overall outsourcing equation. Business strategies are only as good as the quality of their execution - and that's another story altogether.
Intercomp exits global payroll market
DEC 10, 2011
One of Europe's leading international payroll providers, Intercomp Global Services, has closed its multi-country payroll operations covering 80 countries to focus on its core markets in Russia and neighboring states, stunning customers and raising inevitable questions about the fast-growing outsourcing market.
Luc Bossaert, CEO of Intercomp, confirmed to me this week that the company is now focusing its investment effort on its core business in Russia, Ukraine and Kazakhstan, where it's provided a range of HR, payroll, finance, and legal services since 1996. The company's investors believe those emerging markets - which represent 90% of its business - offer a greater return with less risk than its four-year old venture into international payroll, particularly given the latter's exposure to the crisis-ridden euro sector.
As a result, the company has been managing a transition program for the bulk of its international payroll customers, passing them over to partners and third party providers and in one case, transferring staff to enable a customer to take payroll back in-house.
The decision raises a number of questions about Intercomp's expansion strategy and more generally, about the nature of the international payroll market. The company had expanded its international coverage rapidly this year, and Bossaert agrees that its international service delivery model wasn't as scalable as it needed to be. So did it try to do too much, too quickly?
Likewise, Bossaert told me that while he believes it was possible to build a profitable international business, there was pressure on margins and the company repeatedly encountered customers "who wanted to buy a commodity service, but wanted a premium service". That's a familiar issue in the multi-country payroll sector - so do customers have unrealistic pricing expectations?
Just as important, the move provides a test case for a question that haunts every purchaser of outsourcing services: what happens if the outsourcing provider stops providing?
Intercomp's international payroll customers now at least know the answer to that last question. The company was effectively a hybrid aggregator, running 28 countries on a combination of in-house and leased systems, and partnering with in-country providers (ICPs) for the remaining territories. It consolidated the data from the different countries and provided a single interface to the customer.
One unexpected benefit of the aggregator model is that the ICPs can provide an emergency back-up if the prime outsourcer exits the markets, and that's exactly what happened here, with some of Intercomp's customers now contracting directly with its national partners. As we explain in our Research Note, this is not necessarily a painless transition - and it's certainly a step backwards, given that most companies embark on multi-country payroll initiatives in part to reduce their vendor management overhead. On the other hand, of course, it's a lot better than the alternative, missing payroll.
A second set of customers in the Middle East has been sold on to a rival provider. In addition, intriguingly, another customer has carried out what I can best describe as a ‘reverse BPO', hiring 30 Intercomp staff to enable it to bring payroll back in-house.
The remaining customers, meanwhile, were based in Russia, Ukraine or Kazakhstan and continue to work with Intercomp.
More details of just how smoothly those transitions went may well emerge in the coming months. In the meantime, there are other questions to be answered:
These issues are addressed in more detail in Webster Buchanan's five-page Research Note, "Intercomp's exit from multi-country payroll", which is published today.
Webster Buchanan's Research Notes are available to Premium subscribers of Webster Buchanan's International Payroll Center. See our subscriber page for details
Country coverage under the microscope
OCT 17, 2011
Enormous effort has been expended by multinationals in the tricky and often fruitless pursuit of one single provider to meet their global payroll needs. So are practitioners getting the right answers from vendors - or are they even asking the right questions?
As the final preparations for Webster Buchanan's Second Annual Multi-country Payroll Summit in San Francisco got underway earlier this month, part of our ongoing discussions focused on the vendor landscape. In the nine years since Webster Buchanan has researched the international payroll market, the question of market coverage has loomed large - not surprisingly, given how much ground had to be covered, almost literally, by providers. But the question of volume has often overshadowed the issue of quality.
For the last several years there has been a fierce race for coverage, particularly among the payroll aggregators - companies that partner with different payroll providers in individual countries and then act as a single interface to the customer. In the past, however, some of the claims for coverage made by one or two of the providers brought a certain degree of elasticity to the concept of service provision. A vendor claiming to cover three quarters of the world's countries, for example, might indeed have had partners in that many countries - but a fair proportion of those partners wouldn't have been tested with live customer implementations.
Even where a provider has one or two live customers in a particular country, country coverage claims still beg some questions. In particular, what's the customer profile in each territory? A partner handling 50 payslips a month may be a proven example of a live implementation - but it isn't a proven resource for a 5000-employee country population.
Today, while volume of coverage is still a critical factor in vendor selection, the focus is falling much harder on quality. Vendors are looking for differentiation in other areas, in part through their technology platforms, in part through the quality of their partner governance, in part through their regional expertise. With quality of execution remaining a major area of concern, it's a reflection of a maturing market that the discussion is starting to shift from ‘How much?' to ‘How well?'
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